NATIONAL BANK OF POLAND WORKING PAPER No. 86

Transcript

1 NATIONAL BANK OF POLAND WORKING PAPER No. 86 Compeiiveness channel in Poland and Slovakia: a pre-emu DSGE analysis Andrzej Torój Warsaw 2

2 Andrzej Torój Minisry of Finance in Poland and Warsaw School of Economics The views expressed are hose of he auhor and do no necessarily reflec hose of he insiuions he is affliaed wih. The auhor is graeful o Marcin Kolasa and Marek Rozkru, whose commens were criical o successful compleion of his sudy, as well as o an anonymous Referee, he paricipans of 4h Annual Inernaional Conference on Macroeconomic Analysis and Finance in Rehymno, 36h Macromodels Inernaional Conference, NBP seminar and SENAMEK seminar a Warsaw School of Economics, for fruiful discussions. The auhor is also graeful o Agnieszka Sążka-Gawrysiak and Tomasz Łyziak for heir help regarding pas inflaion arge daa. Design: Oliwka s.c. Layou and prin: NBP Prinshop Published by: Naional Bank of Poland Educaion and Publishing Deparmen -99 Warszawa, /2 Święokrzyska Sree phone: , fax Copyrigh by he Naional Bank of Poland, 2 hp:// 2

3 Conens WORKING PAPER No. 86 3

4 Lis of Figures and Tables N a i o n a l B a n k o f P o l a n d

5 Absrac 5.% 3.4% 5.% 3.4% WORKING PAPER No. 86 5

6 Inroducion 6 N a i o n a l B a n k o f P o l a n d

7 Inroducion WORKING PAPER No. 86 7

8 Why does he MCI-raio maer for he adjusmen dynamics? 2,2,,,8,6,4,56,58,73,48,42,37,33,2, EA GR 2) SI 27) CY 28) MT 28) 29) EE 2) i = γ π π + γ y y i π y γ π > γ π < π = wπ + w) π 2 γ π w 8 N a i o n a l B a n k o f P o l a n d

9 i = γ π π + γ y y i π y Why does he MCI-raio maer for he adjusmen dynamics? γ π > γ π < π = wπ + w) π 2 γ π w % % 2% K/EUR cenral pariy σ WORKING PAPER No. 86 9

10 Why does he MCI-raio maer for he adjusmen dynamics? K/EUR cenral pariy K/EUR cenral K/EUR pariy cenral pariy N a i o n a l B a n k o f P o l a n d

11 Why does he MCI-raio maer for he adjusmen dynamics? 2 WORKING PAPER No. 86

12 Why does he MCI-raio maer for he adjusmen dynamics? 2 2 N a i o n a l B a n k o f P o l a n d

13 DSGE model seup w; ; ; w w w; ; ; w w 3 σ σ σ σ U C,N,H )=ε d, C H ) σ σ N +φ ε l, +φ C H N σ> φ> H = hc WORKING PAPER No h [; )

14 DSGE model seup U C,N,H )=ε d, C H ) σ σ N +φ ε l, +φ C H N σ> φ> h [; ) H = hc C [ κ) δ C δ δ T, + κ δ ] δ δ δ C δ N, 3 κ ; ) δ> C H, C F, C T, [ α) η C η η H, ] η + α η η η C η F, α η > α ; k C H, C H, C H, w ) ˆ ε T ˆ w ) εt C j H,,k dj ε T dk ε T ε T CH, w ) ˆ ε T ˆ w ) εt C j H,,k dj ε T dk ε T ε T j ε T > k j C F, C F, C F, w ) ˆ ε T ˆ w ) εt C j F,,k dj ε T dk ε T ε T CF, w ) ˆ ε T ˆ w ) εt C j F,,k dj ε T dk ε T ε T ε T CN, CN, 4 N a i o n a l B a n k o f P o l a n d ε

15 DSGE model seup C F, C F, C F, w ) ˆ ε T ˆ w ) εt C j F,,k dj ε T dk ε T ε T CF, w ) ˆ ε T ˆ w ) εt C j F,,k dj ε T dk ε T ε T ε T CN, CN, C N, w ) ˆ ε N ˆ w ) εn C j N,,k dj ε N dk ε N ε N CN, w ) ε N ˆ ˆ w ε ) N C j N,,k dj ε N dk ε N ε N ε N ε N 3 E β U C,N,H ) max C,N β, ) + w w P j H,,k Cj H,,k dj dk + P j w F,,k Cj F,,kdj dk+ P j N,,k Cj N,,k dj dk + E {Q,+ D + } D + W N D W T P + Q,+ k C H,,k = w PH,,k P H, ) εt C H, C H,,k = w PH,,k k P H, ) εt C H, C F,,k = w C N,,k = w PF,,k P F, PN,k P N ) εt C F, C F,,k = w ) εn C N C N,,k = w PF,,k P N,k WORKING PAPER No. 86 ) ) 5 η η PH, C H, = α) C T, CH, = α P H, C P T, PT, T, P N P F, ) εt C F, ) εn C N,

16 H, H, k DSGE model seup C F,,k = w PF,,k P F, ) εt C F, C F,,k = w PF,,k P F, ) εt C F, C N,,k = w PN,k P N ) εn C N C N,,k = w P N,k P N ) εn C N, C H, = α) PH, P T, ) η C T, CH, = α P H, PT, ) η C T, 3 C F, = α C T, = κ) PF, P T, PT, P ) η C T, C F, = α ) P F, P T, ) η C T, ) δ P ) δ C CT, = κ T, ) C P C N, = κ PN, P ) δ P ) δ C C N, = κ N, C P C H ) σ N ϕ ε l ε d = W P C H ) σ N ϕ ε l ε d = W P P H, [ w ˆ ˆ w ) εt P j H,,k dj dk ] ε T P H, [ w ˆ ˆ w ) ] εt ε T P j H,,k dj dk [ P F, w ˆ ˆ ) εt P j F,,k dj dk w ] ε T P F, [ w ˆ ˆ w ) εt ] ε T P j F,,k dj dk P T, [ α) P η H, ] + αp η η F, P T, [ α ) P η F, ] + α P η η H, P N, w ˆ ˆ w εn P N,,k dj) dk ) ε N P N, w ˆ ˆ w P N,,kdj ) εn ) ε N dk 6 P [ κ) P δ T, ] + κp δ δ N, N a i o n a l B a n k o f P o l a n d ] δ P [ κ ) P δ T, + κ P δ N,

17 C + P + P F, DSGE model seup w ˆ ˆ w P j F,,k dj ε T dk ε T P F, ˆ w ˆ w P j F,,k dj εt dk ε T P T, [ α) P η H, ] + αp η η F, P T, [ α ) P η F, ] + α P η η H, P N, w ˆ ˆ w εn P N,,k dj) dk ) ε N P N, w ˆ ˆ w P N,,kdj ) εn ) ε N dk P [ κ) P δ T, ] + κp δ δ N, P [ κ ) P δ T, ] + κ P δ δ N, π T, = α) π H, + απ F, π = κ) π T, + κπ N, π T, = α ) π F, + α π H, π = κ ) π T, + α π N, 3 C H,,k = w α) κ) PH,,k P H, ) εt ) η ) δ PH, PT, C P T, P C F,,k = α κ) w PF,,k P F, ) εt ) η ) δ PF, PT, C P T, P C N,,k = w κ PN,,k P N, ) εn ) δ PN, C P Q,+ V,+ ξ,+ V,+ + ξ,+ + V,+ P ε d, C H ) σ = ξ,+ βε d,+ C + H + ) σ P + WORKING PAPER No. 86 7

18 Q,+ ξ,+ P V,+ + DSGE model seup ξ,+ + V,+ P ε d, C H ) σ = ξ,+ βε d,+ C + H + ) σ P + C + P + Q,+ 3 β ε d,+ ε d, ) σ ) C+ hc P = Q,+ C hc P + I E Q,+ ) [ ) σ ) ] ε d,+ C+ hc P I = βe ε d, C hc P + c hc = E c + hc ) h σ [i E p + p )+lnβ]+ h σ ε d, E ε d,+ ) c = h +h c + +h E c + h + h) σ i E π + ρ)+ h + h) σ ε d, E ε d,+ ) i lni E π + = E p + p β ρ = lnβ S P H, P F, S = 8 s = p H, p F, N a i o n a l B a n k o f P o l a n d

19 DSGE model seup S P H, P F, S = s = p H, p F, X P T, P N, x = p T, p N, 3 p T, = p H, αs p = p T, κx = p N, + κ) x Q q q = p p = α α ) s κx + κ x Q q V,+ ε P d, C H ) σ ) = ξ,+ β ε d,+ C + H+ σ P+ β ε d,+ ε d, C + h C C h C ) σ ) P = Q P+,+ WORKING PAPER No. 86 9

20 DSGE model seup ε d, C hc ) σ = ϑ ε d, C h C ) σ Q ϑ = ϑ = 3 σ h c hc ) ε d, = σ ) c h h c ε d, q k Y H,k = A H N H,kε H Y N,k = A N N N,kε N N lna H a H ε H ε N mpn w mc H w p H mpn H mc N w p N mpn N N mc H = w p H, a H + ε H ) mc N = w p N, a N + ε N ) 2 N a i o n a l B a n k o f P o l a n d mc H = w p )+p p T, )+p T, p H, ) a H + ε H = w p ) αs κx a H + ε H) ) =

21 DSGE model seup N mc H = w p H, a H + ε H ) mc N = w p N, a N + ε N ) mc H = w p )+p p T, )+p T, p H, ) a H + ε H = w p ) αs κx ) a H + ε H ) = mc N = w p )+p p N, ) ) a N + ε N = = w p )+ κ) x ) a N + ε N 3 θ θ θ p H = θ H p H + θ H) p H p N = θ N p N + θ N) p N p H p N θ ω ω p H = ω H p H b, + ω H) p H f, p N = ω N p N b, + ω N) p N f, p H b, = p H + π H p N b, = p N + π N WORKING PAPER No. 86 2

22 ω DSGE model seup p H = ω H p H b, + ω H) p H f, p N = ω N p N b, + ω N) p N f, p H b, = p H + π H p N b, = p N + π N p H f, = µ H + βθ H) ) βθ H s ) E mc H +s + p H,+k s= 3 µ T ln εt ε T p N f, = µ N + βθ N) ) βθ N s ) E mc N +s + p N,+k s= µ N ln εn ε N mc π H = ω H θ H +ω H [ θ H β)] πh + + ωh ) θ H ) βθ H ) mc H θ H +ω H [ θ H β)] π N = ω N θ N +ω N [ θ N β)] πn + + ωn ) θ N ) βθ N ) mc N θ N +ω N [ θ N β)] βθ H θ H +ω H [ θ H β)] E π H ++ βθ N θ N +ω N [ θ N β)] E π N ++ mc k w Y j H,,k dj = w Cj H,,k dj + w Cj H,,k dj = = C H,,k + CH,,k = ) = α) κ) εt ) η ) δ PH,,k PH, PT, C w P H, P T, P + ) + εt ) η w α κ PH,,k PH, P ) δ ) T, P H, C PT, P = ) εt PH,,k PH, [ α) κ) = w P H, +α κ ) PH, P T, ) η P T, P ) δ ) η ) δ PT, C P T, P + C ] 22 Y H ˆ ˆ w ) ε T Y j H,,k dj ε T dk ε T ε T N a i o n a l B a n k o f P o l a n d

23 DSGE model seup = w PH,,k ) + εt ) η w α κ PH, P ) δ ) T, P H, C PT, P = ) εt ) η ) δ PH,,k PH, PT, P H, [ α) κ) C P T, P + ) η +α κ PH, P ) δ ) T, C P ] P T, Y H ˆ ˆ w ) ε T Y j H,,k dj ε T dk ε T ε T ) η ) δ Y H PH, PT, = α) κ) C P T, P + α κ ) = α) κ) S αη X κδ PH, PT, C + α κ ) S α )η X κ δ C ) η P ) δ T, C P = F 3 ) η ) δ Y F PF, PT, = α κ) C P T, P + α ) κ ) = α κ) S α)η X κδ PF, PT, C + α ) κ ) S α η X κ δ C ) η P ) δ T, C P = C = w C w y H = wc + w) c [ wαη + w) α ) η ] s wκδx w) κ δ x y F = w c + w ) c +[ w α) η + w ) α η ] s w κδx w ) κ δ x w = w α) κ) w α) κ)+ w) α κ ) w = wα κ) wα κ)+ w) α ) κ ) Y N, = C N, = κ PN, P ) δ P ) δ C YN, = CN, = κ N, C P Y N, = κx κ)δ C Y N, = κ X ) κ )δ C y N = κ) δx + c y N = κ ) δ x + c WORKING PAPER No. 86 a T 23 a N a T a N y T y N

24 P N, N, P DSGE model seup Y N, = κx κ)δ C Y N, = κ X ) κ )δ C y N = κ) δx + c y N = κ ) δ x + c a T a N a T a N y T y N 3 i = ρ + γ ρ )γ π π + γ y ỹ )+γ ρ i i ỹ π γ ρ ; ) γ π >, γ y > γ π > π = ỹ = ˆ ˆ π j dj = wπ + w) π ỹ j dj = wỹ + w)ỹ mrs w p mrs mrs Uc,n) n Uc,n ) = σ h c hc )+φn + ε l ε d c 24 N a i o n a l B a n k o f P o l a n d n = N N N nn + N H N nh = Y N A N Y N A N + Y T T A T n N + Y A T Y N n H A N + Y T A T

25 DSGE model seup mrs w p mrs mrs Uc,n) n Uc,n ) = σ h c hc )+φn + ε l ε d c n = N N N nn + N H N nh = Y N A N Y N A N + Y T T A T n N + Y n H A T Y N A N + Y T A T κn N + κ) n H = κy N + κ) y H κa N κ) a H κε N κ) ε H N j 3 ε w N N [ ) ˆ εw w w ) ] εw N εw εw εw j, dj W [ w ˆ w θ w ; ) ] W εw εw j, dj ω w ; ) π w = βe π w + + θw ) βθ w ) θ w [ + φε w ] [mrs w p )] ω w βπ π ) ε D ε T ε N WORKING PAPER No ε l ε i

26 DSGE model seup ε D ε T ε N ε l ε i 3 26 N a i o n a l B a n k o f P o l a n d

27 Esimaion 4 AE x + = Bx + Cε x = Mx + Nε AE x + = Bx + Cε M n n A, B, C) N n n A, B, C) n x = Mx + Nε M n n A, B, C) N n n ε A, = Φε B, C) + ξn Φ ε N, D) T R [ x, f ] [ ] [ ] [ I N M = I Φ } {{ } T x, f ] [ ] [ ] I N + I I } {{ } R ε y = Zx, + d + ɛ WORKING PAPER No ɛ N, H) d Z y x, y H y N

28 Esimaion ε = Φε + ξ ε = Φε + ξ Φ ε N, D) Φ ε N, D) T T R R [ [ x, xf, f ] [ ] [ ] [ ] [ I N ] [ M = ] [ I N I M Φ = } {{ } I T Φ } {{ } T x, xf, f ] [ ] [ ] ] [ I N ] [ + ] I N I I + } {{ } I R I } {{ } R ε ε y = Zx, + d + ɛ 4 y = Zx, + d + ɛ ɛ N, H) d Z ɛ N, H) y d x, Z y y H x, y N y F y N c c π H π N π F π N i w w y F y N c c π H π N π F π N i w w y H y N a = Ta a = Ta P = TP T T + RDR T P = TP T T + RDR T y = Za + d y = Za + d υ = y y υ = y y F = ZP Z T + H ɛ ε L [y, A, B, C, Φ, D, H, d] = Tn 2 ln 2π) 2 ln D + T 2 T ln F 2 = T = υ T F υ d H A B C Φ D 28 ˆθ ) ) D ˆθ = 2 L [θ] 2 N a i o n a l B a n k o f P o l a n d

29 2 2 2 = 2 = Esimaion d H A B C Φ D ) ) D ˆθ = 2 L [θ] 2 ˆθ 4 WORKING PAPER No e

30 Esimaion e 4 Γ h Γ σ Γ s Γ x Γ x Γ ω Γ θ Γ ω Γ θ Γ ω Γ θ Γ φ ŷ H = Γ h y H + Γ h ) y+ H Γ i i E π + ρ)+ w) c h +h c Γ s s h +h s +h E s + ) Γ x x h +h x +h E x + ) Γ x ˆπ W = E π+ W ω ) [ W π C π C +Γ θ W s ˆπ s = Γ ω s π H + θs θ s +ω s π s + +Γ θ smc s ˆσ ĥ ) ] c ĥc w p ) +Γ φ W y ) +h E c + + x h +h x +h E x + ) 3 N a i o n a l B a n k o f P o l a n d

31 e Esimaion y H y N c 4 π H π N y H y N c π H π N π W i e π W y H y N c π H π N π W i e i e. y H y N c π H π N π W i e..5 i = ˆ ρ i i )+ ˆ i ρ ˆ =.3.2 WORKING PAPER No ˆ i i 29Q = i 29Q

32 Esimaion y H y N c π H π N π W i e ˆ i y H y N c i = ρ ˆ π H i i π )+ i N ˆ π W i e ˆ ρ =.3.2 i 29Q = i 29Q y H y N c π H π N π W i e...5 y H y N c π H π N π W i e α α 4 y H y N c π H π N π W i e. ˆ i y H y N c π H π N π W i e i = ρ ˆ i i )+ i ˆ..5 ˆ ρ =.3.2 i 29Q = i 29Q ˆ i α α κ i = ρ ˆ i i )+ i ˆ β ρ ˆ =.3.2 φ W i 29Q = i 29Q 3. φ /σ ω θ h α α h.57 N a i o n a l B a n k o f P o l a n d.84

33 Esimaion φ /σ ω θ h.66 h h θ W =.28 σ = WORKING PAPER No φ

34 Esimaion Parameers \ Region EA κ β α α h ω T ω N η δ η φ σ 4 ω W θ T θ N θ W γ π γ y γ ρ ρ c ρ T ρ NT.5.69 σ 2 c ρ i ρ w ρ i θ W =.28 σ 2 π Tσ 2 π NTσ 2 πnt σ 2 i σ 2 e σ = φ fl.4 η =.44 η =.52 η =.73 η = 34 N a i o n a l B a n k o f P o l a n d

35 φ Esimaion.4 η =.44 η =.52 η =.73 η = δ.65. δ h σ h σ wαη + w) α ) η wαη + w) α ) η WORKING PAPER No

36 Esimaion.7;.64).2;.68).497;.5).435;.22).22;.82).6;.92).8;.64).58;.233).747;.278).697;.332).87;.225).67;.24) 4 36 N a i o n a l B a n k o f P o l a n d

37 Adjusmen dynamics under EMU: IRF analysis C N C N 5.6% σ.6% WORKING PAPER No

38 Adjusmen dynamics under EMU: IRF analysis oupu NT 9%CI 9%CI 9% CI 9%CI oupu T 9%CI 9%CI 9% CI 9%CI inflaion T 9%CI 9%CI 9% CI 9%CI inflaion NT.5.5 9%CI 9%CI 9% CI 9%CI inernal erms of rade 9%CI 9%CI 9% CI 9%CI real wage.2.. 9%CI 9%CI 9% CI 9%CI consumpion 9%CI 9%CI 9% CI 9%CI erms of rade 9%CI 9%CI 9% CI 9%CI N a i o n a l B a n k o f P o l a n d

39 Adjusmen dynamics under EMU: IRF analysis σ 5 WORKING PAPER No

40 Adjusmen dynamics under EMU: IRF analysis oupu T oupu NT %CI 9%CI 9% CI 9%CI inflaion T 9%CI 9%CI 9% CI 5 5 9%CI 2 inernal erms of rade 9%CI 9%CI 9% CI 9%CI inflaion NT %CI 9%CI 9% CI 9%CI 9%CI 9%CI 9% CI 9%CI real wage 9%CI 9%CI 9% CI 9%CI consumpion %CI 9%CI 9% CI 9%CI erms of rade 9%CI 9%CI 9% CI 9%CI N a i o n a l B a n k o f P o l a n d

41 Adjusmen dynamics under EMU: IRF analysis oupu T 9%CI 9%CI 9% CI 9%CI inflaion T 9%CI 9%CI 9% CI 9%CI inernal erms of rade oupu NT 9%CI 9%CI 9% CI 9%CI %CI 9%CI 9% CI 9%CI inflaion NT 9%CI 9%CI 9% CI 9%CI real wage 9%CI 9%CI 9% CI 9%CI consumpion 9%CI 9%CI 9% CI 5 5 9%CI 2 erms of rade %CI 9%CI 9% CI 9%CI WORKING PAPER No. 86 4

42 Adjusmen dynamics under EMU: IRF analysis oupu NT 9%CI 9%CI 9% CI 9%CI oupu T 9%CI 9%CI 9% CI 9%CI inflaion T inflaion NT %CI 9%CI 9% CI 9%CI 9%CI 9%CI 9% CI 9%CI inernal erms of rade 9%CI 9%CI 9% CI 9%CI real wage 9%CI 9%CI 9% CI 9%CI consumpion 9%CI 9%CI 9% CI 9%CI erms of rade 9%CI 9%CI 9% CI 9%CI N a i o n a l B a n k o f P o l a n d

43 MCI-raio and adjusmen o permanen ineres rae shock i i ρ c = h c +h + E +h c + h i +h)σ E π + )+ h ε +h)σ d, E ε d,+ ) i ρ ρ c = h c +h + E +h c + h i +h)σ E π + )+ h [ε +h)σ d, E ε d,+ i] i =.25 6 ρ c =.962 WORKING PAPER No

44 MCI-raio and adjusmen o permanen ineres rae shock 5.% 3.4% 4.3% 8.6% 2.7% 6.3% producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade N a i o n a l B a n k o f P o l a n d

45 6 MCI-raio and adjusmen o permanen ineres rae shock 4 2 producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade producion T producion T producion NT producion NT consumpion consumpion erms of rade erms of rade inernal erms of rade inernal erms of rade ρ c ρ c WORKING PAPER No

46 MCI-raio and adjusmen o permanen ineres rae shock 6 46 N a i o n a l B a n k o f P o l a n d

47 Conclusion 3.4% 5.% 7 WORKING PAPER No

48 References 48 N a i o n a l B a n k o f P o l a n d

49 References WORKING PAPER No

50 References 5 N a i o n a l B a n k o f P o l a n d

51 References WORKING PAPER No. 86 5

52 References 52 N a i o n a l B a n k o f P o l a n d